The equity risk premium —the excess return required to hold stocks over risk-free government bonds—diverges sharply across global markets. While US and UK equities have historically rewarded stock investors over bondholders, high sovereign yields in South Africa and Brazil leave equity investors with virtually no extra compensation for risk. Today’s post by Tiyiselani Mabunda also shows that China offers a stark contrast, providing a healthy return buffer above its bond yields. Notably, equity risk premia can be measured in several ways (see some alternatives here, here and here), and South Africa’s equity market is heavily weighted toward offshore-domiciled companies, which distorts direct domestic comparisons and carries broader macroeconomic implications (discussed here and here).
